Good Faith Transition Relief Ends Starting With the 2021 Reporting Year
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. We hope you find it useful.
Final Instructions for the 2021 Tax Year
The IRS has released the official ACA reporting instructions for the 2021 tax year, including the final 1094-C/1095-C forms. Form 1095-C instructions for the 2021 tax year include two new code options for Line 14, 1T and 1U.
– 1T applies when an applicable employee and their spouse receive a Health Reimbursement Arrangement (HRA) offer of coverage.
– The 1U code is similar but uses a different method of determining affordability. Both 1T and 1U exclude dependents as recipients of HRA coverage.
Also, the deadline for 1095-B/C employee copy deadline has been extended until March 2, 2022* for insurers, self-insuring employers, other coverage providers, and ALEs. The deadline extension is for furnishing forms to employees but does not apply to filing deadlines with the IRS.
The 2021 reporting year deadlines are:
– 1095-C forms furnished to employees – Jan. 31, 2022 (proposed automatic extension to March 2nd)
– Paper filing with IRS – Feb. 28, 2022 (companies with 250+ information returns must file electronically)
– Electronic filing with IRS – March 31, 2022
*The IRS has proposed an automatic 30-day extension (employers and providers don’t have to request it), until March 2, 2022 for furnishing 1095-B/C forms. This proposal is in the process of being submitted to the Office of the Federal Register for publication. The deadline has not changed, but the automatic extension would provide employers with a 30-day buffer.
Good Faith Transition Relief
In previous years, Good Faith Transition Relief protected employers that reported incomplete or incorrect information on their 1094-C and 1095-C information returns – provided that the employer could prove it made reasonable efforts to collect and transmit the necessary data.
Good Faith Transition Relief does not apply for ACA filing for the 2021 tax year, so filing inaccurate or incomplete forms could lead to penalties. If you are manually tracking, ACA software can help streamline tracking and may also help reduce errors.
Not all filing errors will result in penalties. The IRS discontinued good faith relief for errors involving missing TINs or TIN/name mismatches, but will provide “reasonable cause” relief when companies can prove that the mismatch was not caused by an employer mistake. For example, an employee may have provided incorrect information.
– IRS 6721 penalizes an employer for a failure to timely file or for a failure to include correct information on Form 1094-B, Form 1095-B, Form 1094-C or Form 1095-C to the IRS.
– Section 6722 penalizes an employer for a failure to timely furnish correct information on Form 1095-B or 1095-C to an individual.
For the 2021 tax year the penalty under both sections 6721 and 6722 is $280 per return. This penalty can apply twice to the same Form 1095-C, once for the form that is furnished to the employee and once for the form that is submitted to the IRS for a total of $560.
Now that Good Faith Transition Relief has ended, companies failing to timely file/furnish accurate 1094/5-Cs may incur penalties. Data accuracy is crucial in avoiding these penalties issued by the IRS via Letter 5005-A and Letter 972CG.
There is no statute of limitations on ACA penalties, and late or inaccurate filings may result in penalties down the line, if not immediately.
Ensuring that your filing is accurate will minimize the risk for penalties, and our ACA software and services can help you streamline ACA-related data management.
ALEs must offer appropriate and affordable (based on IRS criteria) coverage to at least 95% of their full-time employees (and full-time equivalents). Accurate tracking of when offers of coverage are needed is critical for maintaining compliance.
According to the ACA Times, “While the IRS has not explicitly confirmed the penalty amounts yet, experts have made estimations. For the 2022 tax year, the annualized 4980H(a) penalty will be $2,750 per employee, or $229.17 a month. The annualized 4980H(b) penalty will be $4,120 per employee or $343.33 a month for the 2022 tax year.)”
ACA Software and Services
If you’ve received a penalty notification and need assistance, we provide penalty response services and have helped many companies avoid, or drastically reduce penalties.
If you are…
– Manually tracking ACA-related data
– Using a costly reporting service where you do most of the work
– Are overwhelmed by the entire process
…Passport Software can help.
Since 2015 we have helped our ACA customers ease the burden of compliance management and filing.
Our IRS-certified ACA software streamlines compliance management and simplifies tracking employee ACA-related data. Our software alerts when offers of coverage are needed and if they are considered affordable under IRS criteria.
Our ACA Full Service option is the easiest – just provide a spreadsheet with employee data, discuss general coverage parameters with one of our live experts, and we do the rest.
Whether you select our comprehensive and easy-to-use ACA software or ACA Full-service option, we can help you with compliance management year-round. We are also IRS-approved to transmit current or prior year submissions on your behalf.
Our friendly ACA support is knowledgeable and can walk you through the entire process to ensure you are reporting accurately.